New NetApp Could Rise Fast in the Storage Market

NEWS ANALYSIS: NetApp's aggressive deal to acquire Data Domain creates the world market's fifth-largest data storage company, and it's only a percentage point or so behind Dell, the No. 4 data storage company. The new NetApp should move up quickly.

NetApp surprised the data storage market in a big way on May 20 with the
announcement that it intends to acquire rival Data Domain for about $1.5
billion.

For the record: Data deduplication eliminates redundant data from a disk
storage device in order to lower storage space requirements, which in turn
lowers data center power and cooling costs and lessens the amount of carbon
dioxide produced by generating power to run the hardware.

NetApp's aggressive deal creates the world market's fifth-largest data storage
company, and it's only a percentage point or so behind Dell, at No. 4.

The new NetApp will be one company that is moving up "with a bullet,"
as they say in the music business about popularity charts. NetApp is a
forward-thinking company with smart management and a happy employee base.

"Both companies had been moving up fast, despite some drawbacks," said
storage analyst Brian Babineau of Enterprise Strategy Group. "Keep in mind
that Data Domain [and NetApp, for that matter] is the antithesis of capacity
shipped, because they ship less capacity, and therefore they get less
revenue."

Babineau said it's difficult to compare companies like NetApp and Data Domain
to the big four systems makers, EMC,
Hewlett-Packard, IBM and Dell, which also
feature deduplication in their storage arrays but don't play it up quite as
much. All these companies certainly are trying to sell as much capacity as they
can, but they tend to emphasize different aspects of their products.

Because their arrays are so efficient at finding extraneous data and removing
it, NetApp and Data Domain undoubtedly know that being too efficient can
actually hamper their own sales to an extent. You don't need to buy as much
storage when it works the way it should.

However, that is something the corporate brains at NetApp (hello, Dan
Warmenhoven, Tom Georgens and Dave Hitz!) have to deal with.

Another industry insider had an interesting perspective about this deal.

The acquisition "was a surprise to me," Fadi Albatal, director of
marketing for FalconStor Software, told eWEEK. "But I have to wonder about
something. NetApp claims to have a good first-tier deduplication feature
already. The question is: So why'd they go and spend $1.5 billion to buy Data
Domain? Doesn't their technology work?"

FalconStor, you should know, is a NetApp competitor, selling both OEM and
branded storage arrays. FalconStor, which sells to HP, Sun Microsystems and
other top-tier systems companies, is also known throughout the storage industry
for its efficient deduplication technology.

Nonetheless, the merger is good for the marketplace, Albatal said, because it
validates and publicizes the importance of deduplication as a standard storage
feature.

"Looking at the current economic conditions and seeing that $1.5 billion
was spent means that the growth potential of the market is validated,"
Albatal said. "For the industry, it means that consolidation is
continuing. It also means that the pie is shared with fewer vendors."

Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz